The New York Times reported a large increase in new home starts:
Cheered by reports showing a surprising increase in home building last month, stock markets climbed higher throughout the day, with major market indexes rising to their highest levels since late February.
Stocks of home builders like KB Home, the Centex Corporation and Toll Brothers set off a rally in the broader markets after the government reported that new-home construction rose 22 percent in February from January’s levels to a seasonally adjusted annual pace of 583,000. It was the biggest percentage gain since January 1990 and the first increase since last April.
Why are house builders building more?
Adding more inventory added to the millions of foreclosures is simply idiotic. How will these houses be sold? Unemployed people cannot buy houses. The mortgage banking and derivatives businesses collapsed when they tried to provide financing for people who only made a small amount of money. How will the banks provide financing to those who have no money?
It would be better if the house builders went out of business sooner rather than later. Adding more inventory is one thing, adding more unwanted, see- through shells that will become eyesors is criminal. If there isn’t enough demand to drive prices for houses upward without added inventory, it is hard (impossible) to see where the new demand is going to come from.
Clearly the house builders have gotten their hands on loans from somewhere and are building in order to ‘capture the next wave of speculators’. How are the house builders getting the capital to build more houses? Borrowing it, of course.
If Fed liquidity leaks into the economy at large rather than remaining within the closed circle of finance and banking, goods prices will increase … but fewer customers remain with the means to buy the more expensive goods; true today, more certain next year. The outcome will be more businesses entering bankruptcy.
A story that would give the market some life would be one that has working people continuing over time to earn more and more money relative the to costs of goods. This story would have people out of debt and paying for goods with cash they have saved. Since I will be dead before this story ever runs, I suspect the stock markets will continue to zig- zag downward.
All the way to zero.
Meanwhile, Sharon Astyk has learned the hard way that Peak Oil is really a video game and the only people interested are boyz:
Apparently, readers of The Oil Drum are overwhelmingly men. Even more shockingly, they are overwhelming white, middle aged and middle-to-upper middle class. Lots of them are engineers. Lots more are scientists.
She should mention that most of these are seriously doubtful about the future of the American Way. This contrasts nicely with another boy’s club, conservative politics. David Brooks had this to say earlier this morning:
In short, the United States will never be Europe. It was born as a commercial republic. It’s addicted to the pace of commercial enterprise. After periodic pauses, the country inevitably returns to its elemental nature.
Inevitably, sminevitably! If the government doesn’t start governing pretty soon, there won’t be an America left. Part of the problem is the commercialism leaves out everything else; it take resources for granted. Right now, the US is more of a robbery republic. The government needs to take some people out and prosecute them for their crimes. Long prison sentences would serve to warn others.
Perhaps the boys are on to something.